More Comes From Knowing More

For a long time, economists believed that much of their job was to analyze a world of scarcity, the grim business of harvesting limited resources and distributing too few goods to too many people. And then there was the matter of decreasing returns to additional investment. Such returns were once “a familiar topic in economics,” David Warsh tells us in “Knowledge and the Wealth of Nations.” After all, “even the richest coal vein plays out.”

Decreasing returns and scarcity animated the doomster wing of economics, of which Thomas Malthus was the principal architect. It was he who lamented overpopulation so famously, even ahead of Paul Ehrlich, and predicted bouts of “periodical misery” to adjust human numbers downward, putting them, at least now and then, in equilibrium with the world’s limited riches.

Mr. Warsh, a former economics reporter for the Boston Globe, does not intend to mock earlier theories of political economy but to tell the story of their gradual refinement over time–especially as “one system of thought replaces another.” He notes, for instance, that anti-Malthusian concepts central to the understanding of modern economic growth–abundance and the notion of “increasing returns”–came to compete with the scarcity school of thought. It is axiomatic to us, not least because of technology’s marvelous effects, that “the same amount of work or sacrifice produces an increasing quantity of goods.” But it was an idea that required special attention when it was first considered plausible.